Monday, September 21, 2015

Joe Hockey as MiniRAT. Thoughts on his departure

For my non-Australian readers (ie most of them) forgive a little and personal detour into Australian politics.

Joe Hockey was Tony Abbott's Treasurer (finance minister in most countries). He is widely thought of as being one of the weak links in the Abbott Government and has lost his job in the new administration. He is leaving Parliament.

Joe was not someone I agreed with much. My politics are a fair bit to the left of his. But I have a much higher opinion of him than most people and that opinion was from experience.

Early in my career I worked in Tax Policy Division of the Australian Treasury. Much of my work was detail and accounting obsessive studies on what was really going on in tax avoidance schemes and the like. High bandwidth dry stuff.

Most the details parts of tax policy and corporate law is handled by the Assistant Treasurer who used to go by the awful monicker of "Minister for Revenue and Assistant Treasurer". The wags always shortened this to the MiniRAT.

When I was at the Treasury we had several MiniRATs some of whom were unimpressive. However I had a bit to do with Joe Hockey when he was MiniRAT and found that he was enormously quick at getting across the brief. He did not always agree with the Treasury advice - but he was able to enunciate the issues. He asked exactly the right questions - and sometimes questions we had not thought through ourselves.

Joe had the bandwidth. I mean really properly. Joe was sharp.

When he became Treasurer I had very high expectations. And I was mostly disappointed. As Treasurer he never looked the part.

I do not know why. Partly I think it is hard to be a rational finance minister when you have an ideologically driven (rather than pragmatic) Prime Minister. Tony Abbott did not care for the numbers and that makes it hard to win on the numbers.

Some people think he was just lazy. Smart but lazy. I see no evidence.

Maybe he did not have the support necessary to carry things in Cabinet. I am an outsider these days. I do not know.

I was disgusted at the way Martin Parkinson was railroaded out of the Treasury Secretary job (permanent head job in the UK context). That lowered my opinion of Joe - but again I was not privy to the politics.

That said Joe, if you are reading this. Good luck in the future.

Also here is some unsolicited advice to anyone who winds up in his future. Be aware that underneath the political bluster is a fine mind.

I hoped for and expected a better end to Joe's career. But then maybe this is not the end of his career.

Hockey never illustrated an understanding of the sectoral balances required to balance the economy (as opposed to the budget). Discussed the Federal budget in isolation of our current account deficit / high levels of private debt.

It appears Morrison will have similar issues - promised to tackle 'debt and deficits'without yet recognising that govt debt = private savings. Will not achieve a Govt surplus in an economy with a net international investment position if -$900bn along with a $1.7trn+ in private debt.

Nobody can really know what is in one's head, ir what another's mind us capable of save through performance. Moreover, as many have pointed out, 'intelligence' takes a number of forms, not all of it purely about reflecting on the nature of salient data, what is salient or even the interaction of these things with models.

Some of it is cultural. It entails grasping your own possibility, the contribution you can make in the given constraints, whether that contribution is worthy or even maintainable. Joe offered no public vidence that he understood other people or even himself all that well, and in the end, *at best* he maladapted to a situation over which he had little influence and began an exercise designed purely to hide that reality from others, and in all likelihood to hide that from his consciousness merely so he could continue to play the role of treasurer.

That takes extraordinary intellectual stamina and agility and very few people have that. Inevitably, people saw tgrough that and rightly blamed him for the consequenes of the paradigm he fontinued to prop up with his pathetic dissembling. Supporting a slogsn-based regime, he will ever be recalled for his own slogans and shibboleths -- 'lifters and leaners' , 'age of entitlement' 'poor peopke don 't drive cars' and his assertion that as long as people continued to buy housung it couldn 't be overpriced, and that peopke 'should get a good job that pays good money'.

However 'smart' he was, based on his performance he was an untellectual and cultural mediocrity with an abrasive and arrogant public manner stumbling between inanities and cant. His voive on the radio -- full of faux populism -- merely grated because behind it stood a regime that meant to transfer income from the ,ess well off to the privileged, on the basis that this would buttress their rule.

He leaves official politics a weakthy man, who had his snout firmly in the public trough and was an utter failure at his highest job.

I wish him just desert -- a life in which he comes to be no better off than those he sought to swindle, and the years needed to fully appreciate the harm he did.

My favourite 'Hockey Moment': when he justified Australia's nose bleed high housing costs [95% or > driven by land prices] by stating to a US female interviewer that 'We have a very high standard of residential housing stock in Australia', i.e., our housing is so expensive because the build quality is so high.

Hockey's legacy will be that he targeted the poor, while preserving functionally useless entitlements for the well off in a time of unprecedented boom.

His "age of entitlement" will continue with a pork stuffed US ambassadorial role - joining the illustrious company of ex-politicians like Tim Fischer, whose ambassadorial appointment to the Vatican didn't exist before it was created especially for him.

People with experience of people say the most interesting things. I was reading a book by a Blair apparatchik recently; most of it was awful and then he suddenly remarked on a merit of Berlusconi: the man kept his word. You could read a million words of journalism and not be told that.

He presided over increasing the Australian property bubble to possibly equal the largest in the world. Property is now 3.8 times GDP equal to Japan in 1989.

He may have had the IQ back in the day, but he certainly doesn't have the rationality to see he put Australia in one of the worst positions in its history. Although the Labor government did give him a hospital pass.

Abbott and the Coalition went to the election with an economic platform of contradictions that was impossible to achieve and thus made the Treasurer's job doomed for failure. It was impossible to achieve a lower deficit, no cuts in spending, and no higher taxes all at once.

Hockey put so much emphasis on lowering the deficit during the election campaign that he looked hypocritical and ineffectual when resource prices fell, along with government revenue.

Timing is everything in Politics and for Joe the timing was all wrong. Laborites will tell you Wayne Swan was a good treasurer but he was no better. Having Abbott as the main man was never going to work he was a huge disappointment for right leaning voters and was absolutely despised by the over represented lefties in the Australian media. No Hockey was on the wrong bus but don't feel sorry for him as his nose is well and truly in the trough. Take no notice of the Frans of this world just left wing diatribe not even worthy of a second read. Hockey was not buried by the portfolio he was buried by a man who had wanted to be PM since very early days and quite simply was unpopular.

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.